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Jakarta Post

Indonesian firms prefer to seek funding from debt market: Bloomberg

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Mon, May 18, 2020   /   03:19 pm
Indonesian firms prefer to seek funding from debt market: Bloomberg Bank BJB's investor gathering at the Fairmont Hotel ballroom in Senayan, Central Jakarta on Jan. 29 where the bank offered the first part of its second shelf-registration subordinated bonds to investors. (JP/Moch. Fiqih Prawira)

Indonesian companies have preferred to raise capital from the debt market in the first four months of this year as banks experience tight liquidity, according to Bloomberg data.

Funding from bonds and syndicated loans constituted 98.1 percent of the total capital raised by Indonesian companies from January to April this year, totaling US$18.9 billion, Bloomberg noted.

The volume of bonds listed overseas also doubled to $15.3 billion in the first four months from $7.2 billion in the same period last year, with Singapore being the preferred choice of listing.

“We see more Indonesian companies turning to the bond markets to raise capital partly due to the liquidity tightness among Indonesian local banks compared to their regional peers,” Bloomberg Asia Pacific head of global data Vatsan Sudersan said on a statement on Monday.

The loan-to-deposit ratio (LDR) of the five biggest Indonesian banks by assets has increased from about 90 percent on average in early 2017 to 97 percent at the end of 2019. This compares with 92 percent for five comparable banks in Malaysia and 88 percent for the three biggest banks in Singapore.

Sudersan said he expected the next few months to continue to be challenging for Indonesian companies as they grappled with the economic impacts of the COVID-19 pandemic.

Aside from seeking funds in the debt market, some Indonesian companies have still chosen to seek funding from the equity market through initial public offerings (IPO) on the Indonesia Stock Exchange (IDX).

The bourse saw 26 IPOs launched in the January to April period, the most among exchanges in Southeast Asia, compared to six in Singapore and eight in Malaysia.

However, despite the large number of IPOs, the equity capital market was relatively small in terms of value raised.

The average size of each market offering, including IPOs and additional offerings, was around $10 million, 74 percent lower than the average offering size of $36 million in the same period last year.

As a result, the total fundraising amount through the equity capital market slowed by half to $272 million as of April, compared to $550 million during the same period last year.

The small offering size is a continuation of the trend over the previous years as the IDX only saw six offerings in the last five years that raised approximately $1.1 billion. 

“At this rate, this will result in the lowest amount of equity capital raised since 2009,” Bloomberg wrote in the statement.